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The EITC, Tax Refunds, and Unemployment Spells

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  • Sara LaLumia

Abstract

The earned income tax credit generates large average tax refunds for low-income parents, and these refunds are distributed in a narrow time frame. I rely on this plausibly exogenous source of variation in liquidity to investigate the effect of cash on hand on unemployment duration. Among EITC-eligible women, unemployment spells beginning just after tax refund receipt last longer than unemployment spells beginning at other times of year. There is no evidence that tax refund receipt is associated with longer unemployment duration for men, or that the longer durations for women are associated with higher-quality subsequent job matches. (JEL H24, J64)

Suggested Citation

  • Sara LaLumia, 2013. "The EITC, Tax Refunds, and Unemployment Spells," American Economic Journal: Economic Policy, American Economic Association, vol. 5(2), pages 188-221, May.
  • Handle: RePEc:aea:aejpol:v:5:y:2013:i:2:p:188-221
    Note: DOI: 10.1257/pol.5.2.188
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    Cited by:

    1. Sara LaLumia & James M. Sallee & Nicholas Turner, 2015. "New Evidence on Taxes and the Timing of Birth," American Economic Journal: Economic Policy, American Economic Association, vol. 7(2), pages 258-293, May.
    2. Philippe Wingender & Sara LaLumia, 2015. "Income Effects in Labor Supply: Evidence from Child-Related Tax Benefits," Department of Economics Working Papers 2015-04, Department of Economics, Williams College.
    3. repec:hrv:faseco:34330197 is not listed on IDEAS
    4. Can Cui, 2017. "Cash-on-hand and demand for credit," Empirical Economics, Springer, vol. 52(3), pages 1007-1039, May.
    5. Mesén Vargas, Juliana & Van der Linden, Bruno, 2017. "Is There Always a Trade-off between Insurance and Incentives? The Case of Unemployment with Subsistence Constraints," IZA Discussion Papers 11034, Institute for the Study of Labor (IZA).
    6. Laura Tach & Alicia Eads, 2015. "Trends in the Economic Consequences of Marital and Cohabitation Dissolution in the United States," Demography, Springer;Population Association of America (PAA), vol. 52(2), pages 401-432, April.
    7. Raj Chetty & Amy Finkelstein, 2012. "Social Insurance: Connecting Theory to Data," NBER Working Papers 18433, National Bureau of Economic Research, Inc.
    8. Andrew Foote & Michel Grosz & Ann Stevens, 2015. "Locate Your Nearest Exit: Mass Layoffs and Local Labor Market Response," Working Papers 15-25, Center for Economic Studies, U.S. Census Bureau.
    9. Blaufus, Kay & Hechtner, Frank & Möhlmann, Axel, 2014. "The effect of tax preparation expenses for employees: Evidence from Germany," arqus Discussion Papers in Quantitative Tax Research 157, arqus - Arbeitskreis Quantitative Steuerlehre.

    More about this item

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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